BSP chief: 2 more policy rate cuts possible

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. on Thursday said a lower policy rate through two more cuts in the remaining period of the year is possible if overall inflation remains low.

This was indicated by Remolona ahead of the Philippine Statistics Authority's announcement of the inflation level for June on Friday, 4 July.

"There's room because inflation is low and economic growth is also a bit lower," he told media during the opening of the 32nd BSP Anniversary Multimedia Exhibit and the launch of The Governors Speak Books on Tuesday at the BSP Hub in Malate, Manila.

The BSP eased its policy rate to 5.25 percent last month from 5.75 percent after overall inflation further slowed to 1.3 percent in May from 1.4 percent in April, bringing the average rate to 1.9 percent in the first five months of the year. All the figures were lower than the BSP's minimum inflation target of 2 percent.

Upward inflation pressures

Last week, BSP announced an inflation outlook for June within 1.1 to 1.9 percent. "Upward pressures could be partially offset by lower prices of rice, fish, and fruits, as well as lower electricity rates," BSP said in a statement.

In previous interviews, Remolona had said the BSP Monetary Board was considering easing the rate gradually by 25 basis points. Two more reductions for this year will translate to a 4.75 percent policy rate.

The Board has three more monetary policy meetings in August, October and December.

Remolona said a lower policy rate to lenders would partially drive faster economic growth through higher loan-based spending by households and firms.

“The slowdown in economic growth has been caused by global uncertainty, translating into delayed consumption of big-ticket items, investments and exports,” he said.

Econ growth slows in Q1

Based on national statistics, economic growth in the first quarter of 2025 slowed to 5.4 percent from 5.9 percent in the same quarter of 2024.

Given US President Donald Trump's tariffs and geopolitical tensions between Israel and Iran, Remolona said the Development Budget Coordination Committee or DBCC's lower target range for economic growth this year is "more realistic."